Tesla CEO Elon Musk will testify in court Monday over allegations of unfairness in his $2.6 billion acquisition of solar panel manufacturer SolarCity.
Musk arrived at the Delaware Chancery Court in Wilmington on Monday, Reuters reported, where he will testify before Vice Chancellor Joseph Slights. The trial will decide whether Tesla’s 2016 acquisition of SolarCity was fair following a lawsuit by shareholders alleging Musk, who owned 22% of SolarCity at the time of the acquisition, pressured Tesla’s board to buy the solar company to bail it out.
SolarCity had been struggling financially at the time of the merger, CNBC reported. SolarCity was founded and run by Musk’s cousins, according to CNBC, and Musk himself served as chairman of the board. (RELATED: Elon Musk: A ‘Bunch Of People Probably Will Die’ During Mission To Mars)
Shareholders alleged Musk unfairly enriched himself through the deal, though Musk maintains he had fully recused himself from negotiations, according to CNBC. If Musk loses, he could be forced to pay shareholders almost $2 billion from his personal fortune.
Vote tally shows ~85% of unaffiliated shareholders in favor of the Tesla/SolarCity merger! Thanks for believing.
— Elon Musk (@elonmusk) November 17, 2016
Plaintiffs will have to prove that Musk, who owned 22% of Tesla at the time of the acquisition, was a controlling shareholder and exercised enough power over Tesla’s board to influence negotiations, according to Reuters.
Tesla’s board members, who were also named in the SolarCity suit, settled with shareholders in August 2020 for $60 million, though Musk elected to defend himself in court, the Associated Press reported. Known as a shareholder derivative action, the lawsuit was filed by investors on behalf of Tesla itself, and the proceeds of the suit may go to Tesla rather than individual investors, according to CNBC.
Musk and Tesla were fined $40 million for fraud by the Securities and Exchange Commission in October 2018 after Musk had tweeted out an inflated valuation of the company’s stock. Musk was forced to step down as Tesla’s chairman following the settlement, the Daily Caller reported.
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